North Dakota oil patch posts record annual production; poised for an even bigger 2010

North Dakota oil patch posts record production

BISMARCK, N.D. — North Dakota’s oil patch will set a production record in 2009, despite a year that began with depressed crude prices and a drop in drilling activity, state and industry officials said.

North Dakota will produce about 80 million barrels of oil in 2009, up from a record 62.8 million barrels last year, said Lynn Helms, director of the state Department of Mineral Resources. Final production numbers won’t be known until sometime in the first quarter of 2010.

“We are rocking along,” Helms said. “It’s a much better year than we expected earlier in the year. It adds up fast when you’re pumping out more than 240,000 barrels a day.”

North Dakota has risen from being the ninth-largest oil-producing state in 2006 to No. 4 this year. But a year ago, industry officials believed that the production pinnacle had been reached in the state’s oil patch. Rigs were being idled due to a harsh winter combined with slipping crude prices and a slumping U.S. economy.

This time last year, North Dakota sweet crude was fetching less than $30 a barrel, a five-year low after a record $136.29 in July.

“It was a very bad drop to $27.11 a barrel,” Helms said. “That’s what brought the rigs down.”

North Dakota sweet crude has averaged more than $62 a barrel this December, Helms said.

Industry officials say oil prices of at least $50 a barrel keeps the investment climate strong in North Dakota and rigs working.

There are 79 rigs working at present in North Dakota, down from 86 at the same time last year, Helms said.

“The difference is we have 79 rigs and rising, and last year we had 86 but dropping,” Helms said.

Rig counts dropped to about 30 early this year but have rebounded with the price of crude.

“The rig count was drastically cut through May,” said Ron Ness, president of the North Dakota Petroleum Council, whose group represents about 160 companies. “The good news is most of them are back.”

Each active oil rig represents about 40 direct jobs and 80 indirect jobs in the state. Ness said hundreds of oil workers were laid off early in the year but now there is a shortage of workers in the oil patch. He said the worker shortage could worsen in 2010, expected to be another record production year.

“We’re going to be short hundreds of workers,” he said.

North Dakota has 4,606 wells operating at present, compared with 4,236 the same time last year. Helms said at the current pace, the state could hit 350,000 barrels of oil daily by late 2011, or about 100,000 barrels more than what is being produced currently. But only if crude prices hold, he said.

Ness and Helms said the oil patch will always be volatile, but the future looks positive.

“I predict future peaks and valleys within an elevated activity level,” Ness said. “The only thing that can screw this up is commodity prices or Washington.”